Business Travellers – do we need to worry about them?

The widespread uptake of remote working technology during and post pandemic coupled with the administrative issues of travelling across borders made many of us wonder whether business travel was a thing of the past. Not so – for a lot of businesses, many interactions are still best done in person, and so we continue to see business traveller volumes increase.

While it might be tempting to assume that a short-term trip doesn’t really have any compliance implications, this might not always be the case. Let's take a closer look at the three key areas from a compliance perspective – immigration, tax and social security. 

Immigration – can your traveller even enter the country legally? 

Business travel can be a grey area for business travellers, as rules can be applied subjectively.  In addition, the rules on what business travellers can do in terms of activities and time spent will vary from country to country – so just because it was ok to do something in one location, doesn’t mean the same applies elsewhere. 

 Getting it wrong can be costly: 

• The company can face penalties and/or find sponsoring other foreign employees difficult and face delayed processing times. 
• The individual may be banned from entering the country 

For many countries, business travellers will still need a visa. In some cases, the visa must be issued before travel and how long it can take can vary considerably.  

Some nationalities can travel freely between countries as a visitor (for example, to visit the UK, US, Canadian, Australian and EU nationals can visit without needing a visa). However, these nationals, will still need to abide by the visitor rules:  

• The visit must be temporary so there is an intention to leave within a short time. 
• The visitor cannot have any ties to the country. 
• The visitor cannot spend most of their year in the country they are visiting.  
• They must have sufficient money to live and eat without having to receive money from public funds.
• They cannot be working. Work is defined as anything considered productive. There are some exceptions, such as negotiating a contract, attending meetings and conferences, and getting or delivering training.  What activities you can do, depends on the individual country you are visiting.  

Each country’s rules differ so you need to know what activities are permissible and what the restrictions are for your visitor. As an example, most visas are issued so that a person can travel several times during the period of the visa. How long they can stay on each occasion depends on the individual country’s laws.  It is also important that your travellers keep you up to date when plans change – travelling elsewhere even for a short time can have immigration implications. 

Tax 

Whilst many countries have introduced special regimes in response to the increasing demand from employees to work in different countries, commonly referred to as “Working from Anywhere”, these rules won’t always be applicable for business travellers. It is therefore worth remembering that, broadly speaking, if a person is tax resident in a country, then that is where they will pay tax on their worldwide income and gains. Where a person is not resident in a country then they will pay tax on income sourced to that country - for example, employment income for days spent working in that country. 

For business travellers this can pose a problem. Due to the short-term nature of the travel, they are unlikely to cease to be resident in their home country and therefore still taxable there. The country that they are visiting will in the first instance seek to tax the income for the time spent working there.  

Luckily, relief from double taxation is available through double tax treaties or tax credits – but you do need to know how to go about claiming these. 

Key considerations:

1. Do you know where your employees are?   

   Having a way to track who is travelling and to where is essential.  If a part of the business needs someone to visit them for a few days, it is important that the issues arising are looked at ahead of time – in the UK, for example, that traveller might create a withholding tax requirement.  
   
   

2. Is there a tax treaty between the home country and the country your employee is visiting on business?

   A network of double tax treaties exists between countries that help mitigate double taxation. However, both the wording of the treaties and the interpretation of these will vary from country to country and you might need to change some of the arrangements to ensure someone qualifies.  If you have itinerant travellers, often referred to as “nomads”, you will need to know whether they are tax resident in any country – as this is a pre-condition of using treaties. Someone who is not resident anywhere may find themselves liable to pay tax in every country they work in. 
   
   

3. Do you know how long they will be in that location in one trip and cumulatively?

   One trip on its own might not create an issue - but multiple trips may. 

4.  Do you know what purpose of the business trip is? 

   If your employee is concluding contracts on behalf of a foreign entity this could create a Permanent Establishment of that entity in the country the employee is visiting. This may create corporate tax issues (and reporting and registration requirements!) in that location.  

    

5. Availability of Foreign Tax Credits.

   Where there is no treaty, foreign tax credits may be available to offset double taxation. Understanding the process for these to ensure that the cash flow of the individual is minimally impacted and that any claims are made within the prescribed timeframes is essential.
   
   

6. Do you need to operate payroll and how do you pay taxes?  

   You may need to operate a local payroll to remit taxes and the employee may have to file a tax return in that other country – even if there is treaty protection. These administrative actions increase costs and the risk of penalties where compliance and reporting under local rules is not adhered to.  

Social security 

As a starting point it is useful to remember that the social security obligations that come with international business travel fall into two main categories: 

1. Travel between countries that have social security agreements (Totalization Agreements) – which covers most business travel in Europe and between the major economies
2. Travel between countries where there is no agreement in place.  

What do you need to consider where there is a Totalization Agreement between countries?  

Where a social security agreement exists, almost all business travellers and their employers will remain subject to social security in the home – i.e. sending – country and will be exempt from host country social taxes.  

Usually a Certificate of Coverage (or a certificate known as an A1 Certificate within Europe) will need to be applied for by the traveller’s employer on a trip-by-trip basis, or to cover multiple different trips within Europe.  

Applying for, retaining, and tracking the expiry of these certificates is a key task for employers – without valid certification, they can be exposed to potentially higher, or even duplicate, social security charges and penalties for non-compliance. 

What happens where there is not an agreement in place?  

For business travel outside of the social security agreement network it is harder for employers to get things right. Home country social security will usually continue in these cases, but social security may also be due in the host country. Unlike tax there is no relief for double charges – so this is an additional cost which may not have been budgeted for. While some countries may have exemptions for short trips, many do not. Administratively, some countries will require a form of local registration (for longer business trips) which may be complex to administer from the home country. 

For many employers, business travellers can fall under the radar. They might be home before you even knew they had been anywhere. And tempting as it might be to not do anything, the authorities are becoming more vigilant when it comes to these travellers – and getting it wrong can be costly. If you don’t know about them, you cannot make sure you are being compliant! 

It is wise to get advice and set up a business travel policy to safeguard the company and employees!